An Iranian warship has sunk off the coast of Sri Lanka, with the Sri Lankan authorities saying on Wednesday they had rescued 32 people who were on board and recovered several bodies from the sea.

Sri Lankan Foreign minister Vijitha Herath told parliament that the ship, identified as IRIS Dena, had sunk.

Sources in Sri Lanka's navy and defence ministry said the vessel had been attacked by a submarine and at least 101 people were missing in the incident that took place off Sri Lanka's Indian Ocean coast.

The defence sources said it was unclear who attacked the ship.

A Sri Lankan navy spokesman said the report of 101 people being missing was not true and rejected any reports on the cause of the ship sinking.

The spokesman said 32 people injured in the incident had been rescued by the Sri Lankan navy and were under treatment at a state-run hospital in the southern port city of Galle.

The navy received a distress call from an Iranian ship and informed the Sri Lankan air force and both launched a search and rescue operation, the spokesman said.

Sri Lankan forces were focused on saving lives on the Iranian ship and will investigate the cause of the incident later, he said.

Sri Lankan forces had also not observed any other ship or aircraft in the area of the incident, he added.

"We are hopeful we can rescue more people and will continue (operations) until we are sure," he said.